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GST on Furniture

Goods and Service Tax or GST is a pivotal part of the Indian tax system. The GST tax regime, which came into effect on July 01, 2017, is regulated by the GST Council of India and brings a considerable change in the indirect taxes. Barring a few, this central tax is levied on most applicable products and services in the country, including furniture. Read on to know more about the impact of GST rate on furniture manufacturers.

GST Rate on Wooden Furniture

Under the GST regime, the applicable tax on finished wooden furniture is 12%. Wooden furniture is typically designed using plywood. The applicable rate of GST on plywood is set at a steep 28% as opposed to the much lower VAT rate of 5-6% earlier. The high cost of GST on plywood has ultimately led to an increase in the retail cost of wooden furniture. However, you must note that manufacturers of wooden furniture can claim input tax credit (ITC) on paid GST for plywood as the material is being used to make furniture.

Read through the list to know the applicable GST rates on different wooden products.

Particulars

Applicable GST Rate

Wooden furniture and wooden decorations, including articles used as tableware or kitchenware (does not include goods taxed at 28% under GST)

12%

Wood pulp and bamboo pulp

12%

Wood used in making umbrellas, walking sticks, wooden boxes, drums, tool handles, or similar items

12%

Residual lyes from the manufacture of wood pulp; chemically treated wood, including lignin sulphonates (excluding tall oil)

18%

Wood tar, vegetable pitch, wood naphtha, brewers’ pitch, wood tar oils; wood preparations based on resin, resin acids, or on a vegetable pitch and wood creosote

18%

Fibrewood, plywood, laminated wood; also includes materials having an appearance of wood or being woody in nature

28%

Wood in chips, sawdust, and waste of wood

5%

Cane furniture

28%

GST on Steel and Iron Furniture

All furniture that is designed with steel and iron attract a GST rate of 28%. Iron and steel attract 18% GST as opposed to the 5% VAT earlier. Read the following illustration to understand the implication of GST on iron and steel furniture.

 

Let’s say a store selling modern furniture has a dedicated steel and iron furniture section. Raj purchases a table for ₹50,000 from this store. The table has ₹25,000 worth of steel. The calculation would be:

1. With VAT

Particulars

Amount

Applicable VAT on the Table (A)

₹6,250 (12.5% of ₹50,000)

Available ITC on raw materials (B)

₹1,250 (5% of ₹25,000)

Total Tax Liability (A-B)

₹5,000

2. With GST

Particulars

Amount

Applicable GST on the table (A)

₹14,000 (28% of ₹50,000)

Available ITC on raw materials (B)

₹4,500 (18% of ₹25,000)

Total tax liability (A-B)

₹9,500 (₹14,000 - ₹4,500)

Evidently, the tax liability on steel and iron furniture is much higher under the GST regime as compared to VAT.

Impact of GST on the Furniture Industry

GST on furniture significantly impacts the final cost of the commodity. The GST tax rate on wood, iron, and steel is much higher than the VAT rates. This has, in turn, led to an increase in the cost of furniture made from these products. It is also important to note that the tax liability on manufacturing steel and iron is significantly higher as compared to wood. Safe to say that wooden furniture manufacturers derive better benefits from the GST system than manufacturers of iron and steel furniture.